December 2020
Articles 8 and 24 of India-Singapore DTAA – Limitation of Relief (LOR) provisions (Article 24 of India-Singapore DTAA) are not applicable if (a) India does not have right to tax income pursuant to treaty provision, (b) income is taxed in Singapore under accrual basis. Accordingly, Article 24 is not applicable to shipping income earned by Singapore tax resident which is not taxable in India as per Article 8 of DTAA as also taxable on accrual basis in Singapore
By Dhishat B. Mehta | Bhaumik Goda
Chartered Accountants
6. [2020] 121 taxmann.com 165
(Chen.)(Trib.) Bengal Tiger Line (P) Ltd. vs. DCIT ITA No: 11/Chny/2020 A.Y.: 2015-16 Date of order: 6th November,
2020
Articles
8 and 24 of India-Singapore DTAA – Limitation of Relief (LOR) provisions
(Article 24 of India-Singapore DTAA) are not applicable if (a) India does not
have right to tax income pursuant to treaty provision, (b) income is taxed in
Singapore under accrual basis. Accordingly, Article 24 is not applicable to
shipping income earned by Singapore tax resident which is not taxable in India
as per Article 8 of DTAA as also taxable on accrual basis in Singapore
FACTS
The
assessee, a Singapore tax resident, was involved in the business of operation
of ships in international waters. It did not offer to tax income received from
shipping operations in India relying on Article 8 of the India-Singapore DTAA.
The A.O. denied Article 8 benefit invoking Article 24 of the India-Singapore
DTAA. In the view of the A.O., Limitation of Relief (LOR) provisions under
Article 24 apply since income from shipping operations is exempt under Singapore
tax laws.
The DRP
upheld the view of the A.O. Being aggrieved, the assessee appealed before the
Tribunal.
HELD
- Article 24 is applicable if
(i) income is sourced in a Contracting State (India) and such income is exempt
or taxed at a reduced rate by virtue of any Article under the India-Singapore
DTAA, and (ii) income of the non-resident should be taxable on receipt basis in
Singapore.
- The first condition of
Article 24 is not satisfied as Article 8 of the India-Singapore DTAA provides
exclusive right of taxation to Singapore. It does not provide for exemption or
reduced rate of taxation of such income.
- Since India does not have
right to tax shipping income, the satisfaction of other conditions of Article
24, like exemption or reduced rate of tax, has no bearing on the taxability of
shipping income.
- The second condition is not
satisfied as the income of the shipping company is taxed on accrual basis in
Singapore.
- Reliance was placed on the
Singapore IRAS letter dated 17th September, 20182 wherein it was specifically stated that the
provisions of Article 24 of the India-Singapore DTAA would not be applicable to
shipping income.
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2 Content
of letter is not extracted in decision
